Purpose:

To encourage individuals with disabilities and their families to save private funds for disability-related expenses to supplement, not supplant, benefits provided by other sources (including Medicaid and private insurance) so that people with disabilities can maintain health, independence, and quality of life.

Overview:

This legislation encourages individuals with disabilities and their families to save personal funds for their unique disability-related needs in Disability Savings Accounts (DSAs). The establishment of DSAs will promote the investment of private funds in the long-term well-being of individuals with disabilities through tax-advantaged savings tools, including a refundable tax credit for low-income savers, while protecting the beneficiary’s access to critical public supports.

Specifics:

DSAs will provide a tax-advantaged mechanism for individuals with disabilities to save money. 

• Funds expended from the DSA for specific services such as education, medical services, employment training and support, transportation, and other related services will be tax-free.
  

• Interest on accounts with a balance of $250,000 or less is tax free.
  

• Low income earners will receive a refundable matching tax credit of up to $1000 for their contributions to the DSA.

• Funds from college savings plans and special needs trusts for the same beneficiary can be rolled into the DSA without penalty.

Beneficiaries of the account must be determined to be blind or disabled by the Social Security Administration or the Disability Determination Service of a state and be under the age of 65.  The account can be held and managed by the beneficiary, their spouse or family member, or a legal guardian through a financial institution.  The DSAs are designed to be easier to manage and set up than current savings mechanisms, which often require the expensive services of an attorney.  Beneficiaries or their representative can expend funds directly from the account for services.  Assets held in the fund will not be counted against eligibility for Medicaid and SSI or other federal support services.